econoTwist's

Posts Tagged ‘European Union’

Cyber Attacks Force EU to Close Emission Trading System

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Natural science, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 22.01.11 at 03:15

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset


After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement

Q&A’s

A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the EUobserver.com reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

Related by The Swapper:

Advertisements

Yippee! Another European Stress Test Festival!

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Quantitative Finance, Technology, Views, commentaries and opinions on 20.01.11 at 04:46

EU finance ministers have Wednesday agreed on the broad outlines of another stress tests on major European financial institutions. I’m not really sure what happens during an European Stress Test, but it seems to make a lot of people happy. Perhaps it’s some kind of big party – like a festival, or something.  Anyway – I’m sure it will be fun.

“The euro zone debt crisis could last another ten years.”

Gyorgy Matolcsy


And this years stress test will be even better than last year, when they somehow forgot to invite the Irish, the prominent people of Brussels promise. But, like last year, the organizers are not sure if they will tell us all about it, or not.

Please forgive the sarcasm, but if the new European Banking Authority is going to be taken just a little bit serious, the stress test has to be conducted with total transparency.

Nothing less will ever be able to restore the lost confidence in this maneuvers.

“We are going to draw the lessons by making the next tests more rigorous and even more credible,” says internal market commissioner, Michel Barnier, at the end of a two-day meeting between Europe’s economy chiefs in Brussels.

The new stress tests will this time also take into account underlying capital, liquidity and exposure to sovereign debt.

In July last year, the financial strength of 91 institutions was tested against potential crisis situations. Only seven failed the examination.

The methodology this time, which will imagine even more severe crisis situation, notably in property markets, has yet to be agreed upon, but will be undertaken by the new European Banking Authority, with ministers expecting the tests to be completed by the end of May.

The level of disclosure once the results are concluded however remains a point of division amongst ministers.

The new test comes as Portugal, currently in the euro zone’s sovereign-debt emergency room, sees increased pressure on its bond yields, with rates climbing on 10-year bonds to 6.951 percent, shy of the seven-percent level thought to be the tipping point for the country to request a bail-out.

Meanwhile on Tuesday, the Hungarian EU presidency enjoyed renewed opprobrium from other member states when the country’s finance minister made the gaffe of publicly saying the euro zone debt crisis could last another ten years, the EUobserver.com reports.

Mr. Gyorgy Matolcsy made the comments during the public, televised portion of the meeting of EU finance ministers.

There is a likelihood “that the euro is endangered for another decade,” he says.

Well, that’s just what I pointed out in my commentary on New Years Eve.

Blogger Templates

Related by The Swapper:

Fitch: Euro Governments Borrowing To Drop by 9% in 2011

In Financial Markets, Health and Environment, International Econnomic Politics, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 19.01.11 at 13:36

Fitch Ratings says in a statement that gross government borrowing for the EU15 countries will fall by 9.2% this year, to EUR 1.866 billion versus EUR 2.050 billion in 2010. Fitch expects that the run-off of government-guaranteed bank debt will start to eliminate a source of competition for sovereign debt, potentially easing sovereign financing conditions.

“Fitch expects net borrowing by central governments across Europe to fall sharply in 2011 as governments implement budget cuts.”

Douglas Renwick


In 2010 European governments had the largest borrowing requirement for decades. In a new report, Fitch notes that 2011 euro area gross borrowing is down 13% year-on-year to EUR 1.607 billion, or 16.5% of GDP.

In absolute terms, it is largest in France (EUR 386 bn), Italy (EUR 381 bn) and Germany (EUR 292 bn).

As a share of GDP, it is largest in Greece (25%), Italy (23%), Portugal (23%) Belgium (21%), France (18%) and Ireland (17%).

Overall, gross borrowing has fallen y-o-y for most European governments.

Denmark, Greece, and Portugal are the exceptions.

“Fitch expects net borrowing by central governments across Europe to fall sharply in 2011 as governments implement budget cuts,” Douglas Renwick, Director of Fitch’s Sovereign team, says in a statement.

“The dramatic rise in short-term debt issuance by EU15 countries seen in 2009 has also started to unwind, with short-term debt falling 11.2% year-on-year as of December 2010. As a result, medium and long-term debt maturities are up 13% year-on-year in 2011, partly reflecting higher public debt stocks,” Robert Shearman adds.  Shearman is co-author of the report and member of Fitch’s Sovereign team.

Although the marginal cost of funding increased for ‘peripheral’ euro area governments (Greece, Ireland, Italy, Portugal and Spain), yields declined for the EU15 as a whole, on an annual average y-o-y basis, to 3.5% in 2010 from 3.7% in 2009.

The report notes that by maintaining the average duration of their debt, peripheral countries are slowing the feed-through of higher yields to their effective rate of interest.

Fitch expects that the run-off of government-guaranteed bank debt (EUR 242 billion in 2011) will start to eliminate a source of competition for sovereign debt, potentially easing sovereign financing conditions.

(Note: Fitch defines gross borrowing as net borrowing plus redemptions on medium and long-term debt plus the stock of short-term debt at the end of the previous year, which will need to be rolled over at least once during the current year).

Here’s a copy of the report, entitled “European Government Borrowing: Steps in the Right Direction”

Blogger Templates

.

EU To Increase Bailout Fund, Brussels Demands More Austerity

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 13.01.11 at 02:13

EU economics and monetary affairs commissioner Olli Rehn calls for a substantial increase of the European bailout fund ahead of the meeting between European finance ministers next week. Mr. Rehn also issue a stark warning about all the deficit-slashing austerity measures that European states have so far imposed – it is not enough.

“There is insufficient ambition and a lack of urgency in implementation. That needs to change.”

Olli Rehn


Well, there is one thing the EU leaders absolutely not is lacking, and that is ambitions.  The economics and monetary  commissioner is asking for Europe to embrace structural reforms to bring an end to the debt crisis – by the end of this year.

“We need to review all options for the size and scope of our financial backstops – not only for the current ones but also for the permanent European stability mechanism too,” EU economics and monetary affairs commissioner Olli Rehn writes in an article in the Financial Times Wednesday.

“There is insufficient ambition and a lack of urgency in implementation. That needs to change,” he writes.

The commissioner, who calls for Europe to embrace structural reforms to bring an end to the debt crisis this year, wants to see changes to tax and benefit systems, reform of labor markets and pension provision, a loosening of business regulation and more investment in innovation.

“This calls for a comprehensive response by the whole EU and for bold fiscal and structural measures in all member states.”

He issued the call ahead of the unveiling of the European Commission‘s first annual growth survey, essentially a template with spending recommendations for EU member states, published as part of an effort to bring European-level coherence to national budgetary plans.

The EU member states are already considering an increase in the effective lending capacity of European Financial Stability Facility (EFSF).

While the EFSF kitty amounts to €440 billion, as more countries become borrowers from rather than guarantors of the fund, the actual capacity of the fund currently sits at roughly €250 billion.

Some governments favor a hike in the effective lending capacity to the full €440 billion, while others are looking to a doubling of the fund.

Member states are considering expanding the role of the EFSF to permit the common purchase of government bonds, an exercise which is currently the competence of the European Central Bank.

According to EU sources, any decision on the matter hinges on the result of government bond auctions this week, particularly Portugal’s trip to the market, EUobserver.com reports.

Mr Rehn told reporters Wednesday that “rigorous” cuts and “structural reforms” were necessary for Europe to emerge from its ongoing debt crisis and return to growth.

“Without major changes in the way the European economy functions, Europe will stagnate and be condemned to a viscous circle of high unemployment, high debt and low growth,” he said.

Adding the following warning: “Without intensified fiscal consolidation across member states, we are at mercy of market forces.”

(Now, that’s also an interesting perspective!)

The commission says that “bold” and “resolute policies” are needed to turn around weak projected growth of around 1.5 percent for the EU over the next ten years and 1.25 percent for the euro zone.

Brussels wants to see further cuts to budgets in 2012 on welfare reform – including more conditionality attached to benefits, and a raising of the “premature” retirement ages.

Labor markets should also be made more flexible and “strict and sustained wage moderation” should be maintained.

Blogger Templates

Related by The Swapper:

2011 Key European Issue: Politicians And Politics

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, National Economic Politics, Philosophy, Quantitative Finance, Technology, Views, commentaries and opinions on 11.01.11 at 02:11

According to The Economist Intelligence Unit (EIU) will European politicians and lawmakers come under heavy pressure in 2011, as the politics become more confrontational and creditor countries’ willingness to sustain financial support is fading away. New austerity measures will be implemented and trigger a new wave of social unrest. It’s looking more and more like a worst case scenario, but at least the responsibility for the whole mess is about to be put in the right place.

“It cannot be ruled out that Europe will witness its first sovereign defaults since 1948.”

Economist Intelligence Unit


If a sovereign default should happen, it would put huge strains on banks’ balance sheets, potentially triggering further bank recapitalization in core euro states, EIU argues. “The EU economy has revived somewhat following an unprecedented contraction in 2008-09, but the recovery will remain faltering and uneven, with some countries recovering pre-crisis output levels quickly and others suffering long and painful adjustments,” the analyst concludes.

This is the key remarks by the EIU-analysts in their 2011 report:

* Euro crisis.

The sovereign debt crisis will continue to cast a shadow over the euro zone, and doubts about the single currency’s long-term survival will not easily be assuaged. Policymakers are slowly coming to terms with the fact that the survival of the euro area cannot simply be taken for granted and will depend on careful management of current stresses in the bond markets and weak banking systems, as well as reforms to fiscal governance and more determined efforts to tackle structural problems. Our core forecast is that the euro zone will avoid collapse in 2011, but there are likely to be more than a few uncomfortable moments. We expect that Portugal will be forced to access the EU/IMF financial stability fund, while Spain will need to roll over about 21% of its public debt in 2011, in addition to financing a budget deficit of over 7% of GDP. Financial-market jitters could resurface for many reasons, but a particular concern would be if investors became fundamentally convinced that the EU/IMF fund, nominally worth $750bn (US$990bn), was inadequate to bail out those countries needing assistance. Spain probably won’t need to request a bail-out, but the size of its economy means that any doubts on this front would present a particular risk to euro zone stability. The European Central Bank (ECB), meanwhile, by purchasing government bonds, has stepped into politically controversial territory and is likely to find it increasingly difficult to step back.

* Austerity.

The need to reduce large budget deficits will remain an obvious challenge for many members of the euro zone, and also for the UK. In 2011 austerity will become more visible in European countries as cuts in public services and pay bite. Economic conditions will also be rendered more difficult by the fact that the drivers of the global recovery in 2010 will have largely faded. A key question will be whether the supposed “cure” for fiscal ills will do the “patients” more harm than good by undermining economic growth so much that fiscal ratios worsen or, at least, fail to improve as much as policymakers had hoped. Moreover, if fiscal tightening starts to jeopardize the recovery, it may tempt governments to defer necessary austerity measures. The UK will prove a good test-case in this regard. The coalition government’s dramatic five-year fiscal consolidation programme comprises a mix of tax rises and the deepest sustained period of real-term public spending restraint since the 1940s. We remain of the view that policymakers are over-estimating the ability of a structurally weak private sector to drive economic activity as austerity bites, which could see the government facing the dilemma of either choking off the recovery or risking a rapid shift in investor sentiment by backing away from its fiscal targets.


* Social unrest.

Deep spending cuts and tax rises could have serious detrimental impacts on social and political stability. Sacrifices have been and will continue to be demanded of all those receiving salaries, pensions or other benefits from the state, while unemployment among public-sector workers is likely to increase. Greece in particular has been facing ongoing strikes against government austerity measures, by both public- and private-sector workers. We expect widespread industrial unrest to continue, but do not expect unrest to undermine the government’s efforts to rein in its budget deficit significantly. Political stability in Ireland will be significantly tested. So far, Irish citizens have accepted two years of austerity budgets with little protest. But the prospect of deeper cuts in the years ahead as demanded by the EU/IMF as a condition of Ireland’s $85bn rescue is likely to inspire social unrest. Dangers of social strife in other EU countries exist, but are lower than in the case of Greece and Ireland. Portugal has already undergone a long period of austerity and weak growth. Spain is only at the beginning of a period of public-sector tightening, but is over two years into a recession caused by a collapse in its property market (as well as the international financial turmoil) and has seen unemployment rise to over 20%, double that of most other countries, without so far experiencing anything worse than disciplined and peaceful protests. In France, recent trade union strikes to protest against an overhaul of the state-pension system served as a reminder of the potential for protests to cause significant economic disruption and trigger outbreaks of rioting. The government is likely to delay any further controversial reforms ahead of the 2012 elections. Trade unions in the UK are also expected to stage strikes as the scope of the government’s public-sector cuts become clearer. Comparatively tight legal restrictions on the ability to strike in the UK (in contrast to many other EU countries) will help the coalition to some extent, but we think that the scale of social unrest will prove to be considerably greater and more widespread than is currently assumed.


* Political relations.

The most important bilateral relationship in the EU is between Germany and France, both because their reconciliation laid the foundation of EU integration, and because they are the two largest euro area economies. As the political dynamics of the ongoing sovereign debt crisis demonstrate, Germany’s role in Europe is now more central than it has ever been. We expect Germany to maintain its commitment to the euro, but it’s increasingly assertive promotion of its national interest and reluctance to discuss the issue of macroeconomic imbalances within the euro area could trigger wider tensions. Relations between Chancellor Merkel and President Sarkozy have long been difficult and as discussions over how to hold the euro area together continue, frequent shows of unity are likely to be undermined by fundamental disagreements on crucial matters. There is a risk that relations could deteriorate. In general, French attitudes to the EU have become more sceptical in recent years, as the increase in the EU’s membership has reduced France’s influence. Mr Sarkozy may be able to point to the reform of financial regulations as evidence that the EU is developing in line with France’s aims, but the sovereign debt crisis has also increased the likelihood of a clash with the EU over the poor state of the French public finances.

* State aid.

Given how dependent many financial institutions are on national government and ECB assistance, the removal of the panoply of support measures (including liability guarantees, infusions of capital, government purchases of impaired assets and cheap central bank funding) might precipitate the failure of institutions and a further bout of financial panic. As a result, the phasing-out of support will be gradual. At the same time, efforts will continue to reconstruct internally those financial institutions that are being buttressed by government support. Having waved through all rescue packages at the height of the panic, the European Commission is now reasserting itself. It has already imposed large-scale downsizing on some banks, and more are being scrutinised. From the start of 2011, all financial institutions receiving state aid will be obliged to submit restructuring plans to the Commission (whereas previously this requirement was restricted to banks receiving support above 2% of their risk-weighed assets). The Commission’s active intervention is justified on the grounds that institutions that require state aid cannot be allowed an advantage over those that have survived unaided.

* Financial reform.

The implementation of a revised regulatory architecture for financial institutions will be high on the agenda, at national, EU and international levels. At the level of the EU, in September 2010 member states and the Parliament approved a major reform of the EU’s financial supervisory framework that will enable the creation in January 2011 of a European Systemic Risk Board (ESRB), responsible for macroeconomic supervision, and three new bodies to oversee the supervision of banks, insurers and securities markets throughout the EU. European supervisory authorities (ESAs) will be charged with developing and helping to enforce a common rule book and reinforcing day-to-day supervision by national authorities. There is still considerable scope for any recommendations and decisions to be overturned by governments on the grounds of national budgetary competences. However, together with the new ESAs for the banking sector, the ESRB is likely to have considerable influence over future measures to counter the build-up of risk in the European financial system, such as capital boosts, counter-cyclical capital buffers or maximum loan/value ratios.

* EU budget.

The common agricultural policy (CAP), an elaborate mechanism to maintain prices of agricultural goods, was central to setting up the EU’s forerunner more than half a century ago. Although it has been reformed to be less market-distorting and costly for European taxpayers, many members wish to see further reforms designed to diminish EU intervention, whereas others are adamantly opposed. Recent extreme volatility in food prices and concerns about security of supply have strengthened the latter grouping. The CAP currently accounts for just under half of the total EU budget. Negotiations on how the CAP will be structured and funded for the next budgetary period (2014-21) will be time-consuming and contentious. Although the EU budget accounts for a mere 1% of member states’ combined GDP, and is unlikely to rise above this level, the amount that each member contributes generates some of the bloc’s most divisive and protracted disagreements. The next negotiations, which are already under way, will be at least as difficult as any before owing to the historically large deficits that many member governments are facing. The UK is leading a charge to cut the budget and wants the majority of savings to be found in cohesion funds, while maintaining spending on the CAP (which will please France and Germany). This will be fiercely resisted by newer, poorer member states from central and eastern Europe.

Greece was the first country ever to default in the year 4 BC. I looks like Greece is going to do it again, ups….

And a quick look at how the spreads on Irish Credit-default Swaps are moving, I think the Economist-people safely can replace their “ifs” with “when’s.”

But, you know, they are Economists.
Blogger Templates

.

Select Your Language:

English * Arabic * Chinese * Danish * French * German * Hebrew * Italian * Japanese * Norwegian * Portuguese * Russian * Spanish * Swedish * Turkish

Related by The Swapper:

Smart Money Is Not Stupid (Or Is It?)

In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Technology, Views, commentaries and opinions on 08.01.11 at 05:55

The first week of January is often a positive one for risky assets as investors return from their holidays. The pattern looked like it was going to be repeated this week, when spreads tightened on Tuesday, the first full day of trading in 2011. But the credit markets went into reverse on Wednesday. Something doesn’t smell right. The Markit iTraxx SovX Western Europe index soared to a new record wide level of 220 bp’s by Friday’s close, and the peripheral names ended all at,  or near, unprecedented marks.

“It seems likely that there are real fundamental reasons why credit has underperformed this week.”

Gavan Nolan


The senior financials index  broke through 200 basis points on Friday as the investors adjusted to the new reality – that senior debt is no longer sacrosanct. Equities have become accustomed to being wiped out by bailouts, hence the paper had little impact on bank stocks, according to Markit Credit Research. The equity markets are still up on the week, though they have given back some gains Friday.

However:

“It should be pointed out that haircuts under the proposal are a last resort and would not apply to existing bank debt currently in issue,” credit analyst Gavan Nolan at Markit writes in his weekly wrap-up.

But according to Nolan is it likely that this will create a split in the senior bank debt market between outstanding bonds and the new bail-in bonds if and when the plans are implemented. (Probably 2013-2014).

It could also raise the cost of senior unsecured bonds, possibly creating an incentive to issue more covered bonds.

Well, my guess is that the market participants is smelling a rat, and to me that is a sign that fundamentals still rules.  Even if it do not look like it does sometimes. Hopefully, the experienced traders are aware of the fact that a market can stay irrational longer than they can stay solvent.

And it might seem irrational that problems in private financial institutions at the moment, making new funding more difficult and more expensive,  is having a severe impact on the funding of national governments.

But it does.

Spreads in banks based in the euro zone’s periphery continue to hit record levels, particularly those institutions perceived to have weak capital bases, and the turmoil in the bank credit market had a “knock-on effect on sovereign spreads,” Nolan writes.

“Investors are aware that any bail-in mechanism won’t remove the systemic risk surrounding the banking industry, particularly in the near-term.”

You bet they are!

Nor does is seem rational that the stock market is going up while the credit market is going down.

But it does.

Gavan Nolan raises the question if it’s technical or fundamental factors that cause the credit/equity decoupling?

His answer is; probably a combination of both.

“Anecdotal evidence suggests that liquidity in the credit markets is somewhat thin, particularly in single names. Some investors may be deciding to sit out the volatility at this early state in the year, and dealers are reluctant to take on positions going into the weekend,” he writes.

But there has been considerable activity in the indices. (Click here for more details).

“It seems likely that there are real fundamental reasons why credit has underperformed this week,” Nolan concludes.

I’m not quite sure if that is a good thing or a bad thing – probably a combination of both…

Anyway – the perhaps most important publication of the week was the EU consultation paper on bank bailouts.

Newspaper reports emerged on Wednesday suggesting that the EU is planning a framework that will include the possibility of senior bank bondholders sharing the burden of future bailouts.

This led to the Markit iTraxx Senior Financials index threatening to breach the 200 bp’s level for the first time since June 2010.

“The EU paper duly appeared late on Thursday, and the predictable widening effect on spreads followed.”

The Markit iTraxx SovX Western Europe index soared to a new record wide level of 220 bp’s by Friday’s close, and the peripheral names were all at or near unprecedented marks.

But the banking burden isn’t the only force driving sovereign spreads wider:

  • Spain, Italy and Portugal are all due to tap the capital markets for funds next week, commencing what will be a busy period for government issuance.
  • Portugal’s 6-month T-bill auction earlier this week was less than impressive, with yields nearly double that of the previous auction in September.
  • The ECB has been buying Portuguese government debt for the first time this year, and it would be no surprise to see it continue its interventions next week.

Conclution: It seems like the Mr. Ben Bernanke‘s favorite expression “unusual uncertainty” will be valid for at least another year.

PS:

When it come to the co-called “smart money,” I did a Google picture search of the term.

The result was a disturbingly number of Paris Hilton photos.

Now, if that’s supposed to be an illustration of smart money, then God help us all!

Select Your Language:

English * Arabic * Chinese * Danish * French * German * Hebrew * Italian * Japanese * Norwegian * Portuguese * Russian * Spanish * Swedish * Turkish

IMF Put Irish Bailout On Hold

In Financial Markets, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance on 10.12.10 at 16:54
The International Monetary Fund (IMF) has decided to postpone its approval of the Irish bailout until its been approved by the Irish parliament – Dàil – hopefully after the debate next Wednesday, an IMF spokesperson says in a short  statement issued today.
.
“Assuming parliamentary support for the package, the Managing Director could recommend approval by the IMF Executive Board of the proposed €22.5 billion IMF loan as early as December 16.”
.

The International Monetary Fund


The Government of Ireland decided yesterday to table a motion on the EU-IMF Financial Assistance Program for Ireland in the Irish Parliament (Dáil). The vote on this motion is scheduled for Wednesday, December 15, 2010. Today the IMF has issued the following statement:
.

“The authorities have informed us that while parliamentary approval of the EU-IMF support package is not legally required, the Irish Government has put the motion before parliament to strengthen political support for the agreement.  In deference to Ireland’s parliamentary process, the IMF has decided to postpone consideration by its Board of the proposed loan under the Extended Fund Facility until after the debate. Assuming parliamentary support for the package, the Managing Director could recommend approval by the IMF Executive Board of the proposed €22.5 billion IMF loan as early as December 16.”

“We welcome the first implementation measures of the 2011 budget – stipulating the fiscal consolidation path and important reform measures involved in the program – have recently been passed by the Irish Parliament, confirming Ireland’s strong commitment to the program and the policies involved.”

.

.

Bloomberg See Latvian Sex Industry As Economic Indicator

In Financial Markets, Health and Environment, International Econnomic Politics, Learning, Philosophy, Views, commentaries and opinions on 05.12.10 at 22:46

Signs pointing to an end to the global recession are few. if any, as the latest US labor market figures is yet another slap in the face for the Obama-administration,while the real estate market and the consumers hardly show signs of life. The stock market, who is supposed to reflect the health of the economy seems to be totally lost in space, without any connection to the fundamentals. For the last couple of years, I’ve suggested that maybe  traditional economic theories and methods are outdated, and should be replaced. Well, the news agency Bloomberg have found a unique index which is said to be a much better barometer – the sex industry.

“It can change by the hour, by the day. It tells you very, very quickly what the state of demand is.”

Matthew Lynn

Matthew Lynn from the Bloomberg news agency believes that in hard times, traditional indicators are useless, (and I agree on that one). However,  he suggests alternative benchmarks such as the price of prostitutes. The economist claims the Latvian sex market is the most precise indicator of the health of global trade.

So far it’s been a wild ride for Latvia, once the fastest growing economy in the EU, sliding to the bottom of the list in. just six months.

It has the second highest unemployment rate in Europe (after Spain), and its GDP have dropped almost 20%, comparable to that of America during the Great Depression.

While the country is battling with recession, observers outside Latvia are scanning its shattered economy for some hint of when the global crisis will end.

Matthew Lynn from the Bloomberg agency believes that in hard times, traditional indicators are useless. He suggests alternative benchmarks such as the price of prostitutes.

The economist claims the Latvian sex market is the most precise indicator of the health of global trade.

“It’s very flexible. There’s no barrier for people coming here and the price is very flexible. It can change by the hour, by the day. It tells you very, very quickly what the state of demand is. There’s not much money flowing around the system. There’s not much cash there. And that means the economy is getting into trouble,” Matthew Lynn says.

Matthew Lynn’s main argument is that since the price for sex services has collapsed by about two-thirds since the start of the crisis, the global economy is still in big trouble.

Once the cost of illicit comforts goes up, the world will start recovering, according to Lynn’s theory.

That may be true, and I suppose Bloomberg and Matthew Lynn has done the necessary research to support it.

But some are still skeptical.

“I wouldn’t say that for any economy that will suit, simply because there’re many countries in the world where prostitutes are not legal and businesses are not transparent at all and then you will never get a valid indicator monitoring their prices even if you manage to,” financial analyst Evgeny Nadorshin says.

Russia Today reports that many Latvians are not too keen on their country being portrayed as “the red light district of Europe.”

More on the subject:

Night club closed because of sex party and fire extinguishers

“We are looking forward to recovery” – Latvian president

Desert sex amidst financial storm

Sexual discrimination victim receives compensation – in coins

Related by The Swapper: